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2016 (1) TMI 167 - ITAT KOLKATA

2016 (1) TMI 167 - ITAT KOLKATA - [2016] 45 ITR (Trib) 216 - Validity of reassessment proceedings - maintainability of appeal - Held that:- The appeal is maintainable before this tribunal against the order passed by the Learned AO u/s 143(3) read with section 147 read with section 144C pursuant to the directions of the DRP.

The time limit for completion of this reassessment is within one year from the end of the financial year in which the notice u/s 148 was issued. The Learned AO did .....

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s. - Decided in favour of assessee. - I.T.A No. 616/Kol/2015 - Dated:- 15-10-2015 - Shri Mahavir Singh,Judicial Member, and Shri M. Balaganesh, Accountant Member For The Appellant : Shri Manoneet Dalal, FCA and Ms.Gunjan Khanna, FCA, ld.ARs For The Respondent : Shri R.R. Das, CIT, ld.DR ORDER SHRI M.BALAGANESH, AM This appeal of the assessee arises out of the order of the Dispute Resolution Panel (DRP) dated 25.3.2015 and final order passed by the Learned AO u/s 143(3) read with section 147 and .....

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loss of ₹ 3,78,75,426/-. This revised return was filed within the due date prescribed u/s 139(5) of the Act. b) The assessment was completed u/s 143(1) of the Act on 29.5.2012. c) Admittedly, no notice u/s 143(2) of the Act was issued selecting the case for scrutiny by the Learned AO. Hence the assessee was under the bonafide belief that the assessment for the Asst Year 2010-11 was completed u/s 143(1) itself on 29.5.2012. d) When no proceedings were pending for the Asst Year 2010-11 befor .....

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e u/s 143(2) of the Act, treated the order of TPO suggesting an addition of ₹ 7,51,20,484/- as information and sought to reopen the assessment by issuance of notice u/s 148 of the Act on 26.3.2014. g) The assessee filed the return in response to notice issued u/s 148 of the Act by declaring loss of ₹ 3,78,75,426/- on 8.4.2014. h) Notice u/s 143(2) of the Act was issued on the assessee on 5.5.2014. i) A draft reassessment order was passed u/s 144C(1) of the Act on 16.6.2014 based on t .....

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rder, the assessee filed objections before the DRP and the same were disposed off by the DRP vide proceedings dated 25.3.2015. k) Pursuant to the directions of the DRP, final order was passed by the Learned AO u/s 147 / 143(3) / 144C of the Act on 6.4.2015 determining the total income at ₹ 3,72,45,060/- after making an addition of ₹ 7,51,20,484/- being the adjustment to ALP suggested in the original TPO order dated 28.1.2014. l) Now the assessee has preferred an appeal before us on v .....

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r deciding the case before us. Normally when a return is filed by the assessee, it would either get completed u/s 143(1) of the Act by receiving intimation from the Assessing Officer. If the case is selected for scrutiny by issuance of notice u/s 143(2) of the Act within the prescribed time, then the assessment would get completed u/s 143(3) or 144 of the Act. Hence it is well settled that when no scrutiny notice u/s 143(2) is served on the assessee, the assessment would deemed to be completed b .....

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levant provisions of section 92CA(1) is reproduced hereunder:- 92CA - Reference to Transfer Pricing Officer (1) Where any person, being the assessee, has entered into an international transaction or specified domestic transaction in any previous year, and the Assessing Officer considers it necessary or expedient so to do, he may, with the previous approval of the Principal Commissioner or Commissioner, refer the computation of the arm s length price in relation to the said international transact .....

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an associated enterprise. One of the sources from which the factual information regarding international transaction can be gathered in Form No. 3CEB filed with the return which is the nature of an accountant s report containing basic details of an international transaction entered into by the taxpayer during the year and the associated enterprise with which such transaction is entered into, the nature of documents maintained and the method followed. Thus, the primary details regarding such inte .....

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te data base, it would be appropriate if a small number of cases are selected for scrutiny of transfer price and these are dealt with effectively. The Central Board of Direct Taxes, therefore, have decided that wherever the aggregate value of international transactions exceeds ₹ 5 crores, the case should be picked up for scrutiny and reference under section 92CA be made to the TPO. If there are more than one international transaction with an associated enterprise or there are transactions .....

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scrutiny before making reference to the TPO, the Assessing Officer may proceed to examine other aspects of the case during pendency of assessment proceedings but await the report of the TPO on the value of international transaction before making final assessment. The threshold limit of ₹ 5 crores will be reviewed depending upon the workload of the TPOs. The work relating to selection of cases for scrutiny and reference to TPO on the above basis in respect of pending returns filed for the .....

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we hold that no case was pending before the Learned AO while making reference to Learned TPO and accordingly, the order passed by the Learned TPO on 28.1.2014 making an adjustment of ₹ 7,51,20,484/- to ALP is declared void ab initio and illegal and hence cannot be relied upon by the lower authorities. 4.2. We place reliance on the CBDT Circular No. 549 dated 31.10.1989 which states that if an assessee, after furnishing the return of income does not receive a notice u/s 143(2) from the depa .....

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2234/PN/2012 dated 2.2.2015 for Asst Year 2007-08, wherein it was held an assessing officer could make reference to the TPO u/s 92CA of the Act only after selecting the case for scrutiny assessment. 4.3. We also place reliance on the decision of the Hon ble Karnataka High Court in the case of CIT vs M/s Sap Labs pvt Ltd in ITA No. 842 of 2008 and ITA No. 339 of 2010 vide order dated 25.8.2014. In this case, the assessee filed its return of income for Asst Year 2002-03 on 31.10.2002. The same wa .....

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d pursuant to filing of the original return, the assessment is deemed to have become final. In reply to the notice issued u/s 148 of the Act, the assessee filed a letter dated 21.4.2004 requesting the Assessing Authority to treat the return filed on 31.10.2002 as return in compliance with the notice u/s 148 of the Act. Infact the TPO on 20.1.2005 passed an order u/s 92CA of the Act accepting the pricing of the Assessing Authority. However, the CIT invoking his power u/s 263 of the Act initiated .....

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erence was made by the Assessing Authority, there was no return pending for consideration and therefore, the Tribunal has set aside the order of the Commissioner. It is against the said order, the revenue is before this Court. From the aforesaid facts, it is clear that on the day the reference was made by the Assessing Authority to the Transfer Pricing Authority, there was no return pending for consideration by him and therefore, the very reference was bad. Even otherwise, the said TPO did not f .....

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Learned AO having realized his mistake of not selecting the case for scrutiny sought to remain silent after receiving the Learned TPO s order dated 28.1.2014. We find that notice u/s 143(2) was also issued and served on the assessee in the reassessment proceedings. We find that in the reassessment proceedings, no fresh reference was made to the Learned TPO u/s 92CA(1) of the Act by the Learned AO. We hold that the action of using the old TPO order passed u/s 92CA(3) as an information for formin .....

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Their Lordships held that such a reference could not have been made under the scheme of the Act because the assessment proceedings had come to an end before the point of time when such a reference was made, and as such the reference itself was legally invalid. The stand of the revenue was that even if reference to the DVO is to be held to be invalid, the DVO s report constituted information and as such it could be a good basis for coming to the conclusion that wealth has escaped assessment. Reje .....

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e order passed by the Learned TPO passed pursuant to an illegal reference cannot be used in the reassessment proceedings by the Learned AO as both the proceedings are separate and independent of one another. In view of the above, we hold that the reassessment proceedings initiated based on the TPO s order dated 28.1.2014 suggesting an adjustment of ₹ 7,51,20,484/- to ALP (which was based on an illegal reference ) by the Learned AO is void ab initio and bad in law. 6. Maintainability of app .....

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e shall within thirty days of the receipt by him of the draft order- (a) file his acceptance of the variations to the assessing officer ; or (b) file his objections, if any, to such variation with - (i) the Dispute Resolution Panel (ii) the assessing officer It is clear from sub section 2 of section 144C that it is the eligible assessee only who can file objections to draft assessment order before DRP. The jurisdiction of DRP is triggered only when an eligible assessee files objections before it .....

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decided by the panel. Hence, other objections taken by the assessee are not being taken up for adjudication by this panel. In view of above discussion, the application of the assessee in respect of the assessment for AY 2010-11 is rejected ab initio as void and sans jurisdiction. The AO is directed to proceed accordingly as per law. We find that in the instant case, the assessee did not accept the variations proposed by the Learned AO to the ALP in the sum of ₹ 7,51,20,484/- and therefore .....

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validity of the Learned AO to adopt the order passed by the Learned TPO on 28.1.2014 based on an illegal reference. We find that the CBDT Instruction No. 3 of 2003 is very clear on this subject. It will be relevant to look into Section 144C(15) of the Act:- (15) For the purposes of this section ,- (a) Dispute Resolution Panel means a collegiums comprising of three Principal Commissioners or Commissioners of Income Tax constituted by the Board for this purpose ; (b) eligible assessee means , - ( .....

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e assessee is accepted by the Learned AO itself by referring the case to TPO (though illegal) and accepted the order passed u/s 92CA(3) of the Act and made an adjustment of ₹ 7,51,20,484/- as per the said order. Just because the assessee had stated before the DRP that it is not an eligible assessee for whatever reasons best known to it, the DRP cannot brush aside these facts and sweep it under the carpet on the roots addressed by the revenue itself. We also find that the case law relied up .....

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act of non-availability of condonation powers with the DRP was upheld by the Chennai Tribunal. Hence the case law relied would not advance the case of the revenue. In view of the aforesaid facts and circumstances, we hold that the appeal is maintainable before this tribunal against the order passed by the Learned AO u/s 143(3) read with section 147 read with section 144C pursuant to the directions of the DRP. 7. Reassessment barred by limitation The Learned AO argued that the reassessment is bar .....

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